Lack of infrastructure, slow consumer acceptance complicate quest for alternative fuels
According to two of the most influential corporate voices in the automotive field, rising gas prices will keep driving demand for alternative energy. But the twin challenges of slow adoption and a lack of infrastructure continue to complicate the search for cleaner, cheaper fuel.
“I have three kids and I know a lot of people here have kids,” Mark Reuss, GM vice president and president of General Motors North America, told his St. Louis audience. “It’s about what we’re going to leave to our kids when we turn the world over to them.”
Reuss, who has headed the automaker’s North American operation since 2009, and Andrew C. Taylor, chairman and CEO of rental car giant Enterprise Holdings, delivered their messages Monday night to an overflow crowd at the Donald Danforth Plant Science Center in an hour-long presentation on corporate sustainability that ranged from the untapped promise of biofuels to the daunting politics of a national energy policy.
Reuss, a mechanical engineer who started his GM career as a student intern nearly three decades ago, eventually rose through the company’s ranks to head the automaker’s operations in Australia and New Zealand before taking on his current title.
Taylor, a 40-year veteran of automotive-related fields, is the son of Jack Taylor, founder of Enterprise-Rent-A-Car which began in St. Louis in 1957. The younger Taylor assumed duties as CEO of the company in 1991 and was named chairman a decade later. Subsequent acquisitions brought competitors Alamo Rent A Car and National Car Rental under the corporate umbrella making Enterprise, with 7,800 locations and a million-vehicle fleet, the largest car rental company in the world.
In 2007, the Taylor family established the Enterprise Rent-A-Car Institute for Renewable Fuels at the Danforth Center.
In a moderated discussion, Taylor spoke bluntly about the challenges of widespread adoption of electric vehicles, which his company is already offering on the West Coast. While he said “range anxiety” is still a problem due to a lack of charging stations, he also felt the organization had a responsibility to lead the way.
“We’re going to buy some of these vehicles and they are not going to be that great economically for us,” he said. “But as the largest private owner of vehicles in the world, we have to be playing in this arena, trying these vehicles out and helping manufacturers to understand if they are resonating with customers. They are part of our sustainability program.”
Reuss said the decisions on what vehicles to make and which choices to pursue were often fraught with risk.
“The whole industry right now is placing their bets for the next five or 10 years on what things are going to be, how affordable they are going to be for people,” he said. “Is there infrastructure, at least in the infant stage so that we can actually fill up (alternative fuels vehicles) and use them? All those bets are being placed right now because the industry has money. We’ve had a pretty decent run since the global financial crisis.”
But Reuss noted that, while there is interest in some urban areas, there still isn't widespread desire for completely electric cars among the general public. In the near term, GM is staking more on hybrid products like the Volt and vehicles like the Buick LaCrosse, which increases fuel efficiency by mixing in electric components without exiling the internal combustion engine.
Reuss, who drives a Volt himself, has used only 16 gallons of fuel in two years on the road. He also likes the possibilities presented by compressed natural gas vehicles. The only obstacle is a lack of widely available home-based compressor technology.
“You don’t have to pay for (a hydrogen compressor) on every gas station corner,” he said. “Everybody’s got gas delivered to their house. You can deliver it quickly to a car; I don’t think that’s a reach.”
Taylor said car makers don’t face easy choices when making massive capital investments.
“These are tough decisions for GM and other manufacturers about which way to go and what will be acceptable. But it’s also a really exciting time for the business because you don’t know exactly what’s going to happen,” said the Enterprise chairman.
Some of that uncertainty even bleeds through into Taylor’s rental industry, which must market the aging components of its fleet when they are phased out.
“Some of my people are really concerned because they don’t know what the residual value of some of this stuff is going to be. They say, ‘That’s a good idea, Andy, but don’t send me too many,’” he said with a grin as the audience laughed.
Oddly, even a successful reduction in fossil fuel usage can pose its own set of problems, such as finding new ways to pay for roads. Taylor cited Reuss’ story about using only 16 gallons of gas in his Volt.
For every gallon of gas, 18 cents is for the national highway trust fund, according to Taylor. “So Washington now has another issue that they are going to have to deal with because the amount of gasoline sold in the U.S. is dropping, probably at a faster rate than most people know,” he said.
Both executives agreed that the price of gas was volatile and, over the long term, likely to be headed in one direction.
“There is no doubt,” said Taylor. “It’s going to be higher.”
How that will affect the market is still not entirely clear, but Taylor said it is not unusual during periods of rising prices for customers at his rental counter to refuse free upgrades to larger vehicles.
Reuss said it takes about a month before higher prices at the pump begins to impact how consumers spend money.
“People are getting used to the idea that energy is going to cost a little more. As long as we don’t go to $5 in six days, people can adjust their lifestyles and habits to it,” he said. “By the same token, they are going to be looking at new cars because the operating costs are going to be so much lower than the 11-year average" aged car.
Reuss thinks manufacturers can respond to that challenge and notes that the Volt, which he said had the highest vehicle satisfaction numbers of any car made, is on a pace to double its sales to 20,000 or 25,000 this year.
“I don’t buy into the idea that our engineers can’t solve the equation for the size of cars that people really want,” he said.
America lags in energy race
Reuss answered a question on where America ranks in the energy race.
“I spent a number of years in Asia and Australia,” he said. “We’re behind and it feels bad. We just haven’t had an energy policy we can rally around here for a long time.”
Both executives were asked if they believed climate change was manmade and required action. Taylor said that, from a corporate sustainability viewpoint, it didn’t matter.
“It’s not a question of what I believe,” he said. “It’s a question of what our customers believe, what the world believes. We put our customers first and that’s going to cause us to do what we have to do to run a sustainable business model. Part of that is making sure our customers are proud to do business with us.”
Reuss echoed Taylor’s point. Reuss also went on to say he did believe in human-caused climate change. He said, however, he didn’t know if federal officials and legislation could attack the problem effectively. He hopes everyone will play a role.
“I’m not sure that the government is the answer to this,” he said. “I think we are. We live here.”